🔗 Share this article

“Dollars, dollars.” Beneath the scorching heat, scores of money changers are offering American currency along Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a country accustomed to holding the greenback.

“The optimal moment to buy is currently,” says one arbolito, declining to give her identity. “[The dollar] dropped a little but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds expect a devaluation of the national currency after the voting is over. President Javier Milei has imposed a cap on the peso to tame triple-digit inflation and currently it remains artificially high and foreign reserves are depleted, causing Argentina’s economy stagnant as consumers opt for cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and its voters have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and currently the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising muscular measures to wrestle back command of economic management from the establishment on behalf of the people.

These defining traits are also seen in his ally to the north, as well as the UK politician, who presents himself as a pint-swilling people’s champion even though he is a privately educated former stockbroker.

Until recent months, the president’s strategy – including extensive privatisations and deep public spending cuts – had earned praise from the IMF for helping to bring inflation under control. This plan shares similarities with that of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be slain, regardless of the consequences.

But financial markets began losing confidence in Milei’s radical project in recent months following a shaky result in local polls and a series of corruption scandals. Solely large-scale financial intervention from abroad has averted what looked set to become a major currency crisis.

Inconsistencies

The 2016 referendum several years ago arguably had some of the same logic, and its leader, the former prime minister, swept away concerns about economic detail with confident resolve to enact public demand despite elite opposition.

Farage to date outlined limited plans to paper except for a call for large-scale removals, which he subsequently seemed to adjust on the hoof. He aims to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be unsettled: wary of being accused of proposing reckless spending, he recently abandoned a promise for significant tax cuts. His Reform party deputy, Richard Tice, stated they would concentrate instead on public spending cuts.

The opposition hopes this position will enable it to depict the populist as planning to reintroduce austerity – an argument the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell notes there are contradictions in Farage’s economic programme, such as it is. “The party is funded by affluent backers demanding tax cuts and reduced rules, yet also emphasizing the complaints of working people and the loss in manufacturing employment,” he explains. “There is a conflict here among wealthy supporters who want radical free-market policies, and this narrative of bringing back UK employment and reindustrialisation.”

Maintaining Control

Realistically, the evidence indicates neither left nor right populists tend to fare well when confronting practical difficulties (though of course each charismatic individual claims to offer distinct solutions).

A recent paper in the American Economic Review analysed the outcomes of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, GDP per capita is often a tenth less in countries governed by populist rulers than in similar economies with more mainstream regimes.

“Economic disintegration, weakening economic fundamentals and the decay of governance usually occur together with populist rule,” contend the paper’s authors.

A further interesting result from the study, however, is that even with their negative impacts, populist figures tend to be good at holding on to power, remaining in power for a considerable time, versus four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their policies fail, such leaders face immediate consequences at the ballot box. Similar to pledges made to “take back control”, their appeal extends past mundane economics.

Yet back in Buenos Aires, whether Milei’s populist project fails or is sustained through foreign assistance, the Argentine people have already paid a heavy price.